Thursday, January 19, 2012

The minute this thing [Comex/LBMA/ETF paper fraud vs. actual physical demand] gets away and we start to have a real market and prices start to reflect real supply/demand, it will bring in a lot more demand at the same time supply is being diminished. This is why you’re going to have price moves of staggering dimensions. - John Embry, interview with King World News LINK

John Embry is one of the few precious metals market participants that is worth paying attention to - at least that I've found in my 10+ years of doing exclusively this sector. I couldn't agree more with the comments he makes in the link above. It IS going to get very nasty out there and the increasing degree and blatantness of the fraud going on in our system is the number one symptom of the true state of collapse going on in this country (and globally).

At any rate, I didn't want to spend time with bank earnings this quarter but the manipulation and bullshit being reported by the likes of Wells Fargo, Bank of America, etc. is farcical to the point of tears. As you are probably aware, Bank of America reported a $2 billion in net income, or 15 cents/share. This was basically in line with Street guesstimates. However, as always, it pays to comb through the 8-k/10-k in order to wipe away the lipstick and see what horrors are being covered up.

In Bank of America's case it is just too easy to strip away the lies and deceit and conclude that beneath the headlines BAC is a dying bank. To start with - and I normally ignore the fancy slides attached to these 8-ks that are fabricated for the Wall Street analysts who do no more than regurgitate the vomit served up by bank CEO's - if you scan through the slide show you'll find an interesting comment about loss reserves. It turns out in this case that BAC is part of a group of banks being sued over guarantees made to investors who invested in the fraudulent mortgages originated by these banks during the housing bubble. In here, BAC acknowledges that they are under-reserved for this by at least $5 billion. In other words, if Bank of America were honestly applying GAAP accrual accounting, they would have taken at $5 billion charge against earnings, thereby wiping out the $2 billion net income stated and they would have reported a $3 billion loss. You can read about the litigation going on HERE and keep in mind that the judicial system is starting to deliver much more severe punishment to these banks. So the $5 billion acknowledged may be too low. You can see the slide show in the 8-k I've linked below.

The $5 billion reporting lie is the easiest to spot. The other really easy one is the general "provision for credit losses" charge. In 2010 they took $28.4 billion credit loss provisions (meaning, they estimate the loss expected on all of the crappy loans and mortgages not already sold to Tim Geithner's Treasury and create a loss reserve - a balance sheet item - which results in a GAAP income charge in the current year). Just to make this quick and easy, BAC has $387 billion total in residential mortgages and home equity loans. We know from past analysis that BAC is carrying the first mortgages on their books at too high of a valuation. Since 1st liens are likely still substantially underwater, that means home equity loans are worthless, on average and in general. BAC has $125 billion in home equity paper. Even in the best case economic scenario, we can safely assume most of that will have to be eventually written down to zero. But let's be spiritual and give BAC the benefit of doubt and say that only 1/3 will be written off completely. That still leaves $42 billion in write-offs. How about they start taking $4 billion per year in charges for this (and we know it will be a lot bigger) and run it honestly through their income statement? Add that to the $3 billion loss as defined above and you know have $7 billion in losses.

And $7 billion in losses does not take into account many other items of interest that I simply do not have time to look into. But you get the idea when I say that ultimately, with the test of time, the earnings released today will be revealed as a complete absurdity and fraud. Here is BAC's 8-k if you want to do some work yourself or see what I saw and wrote about: LINK

To compound the fraud going on - briefly - many of you have probably heard about the lawsuit filed against JP Morgan yesterday that alleges that JP Morgan fabricated and created documentation that has been used to collect on foreclosed mortgages, ahead of all other creditors in bankruptcy proceedings. This fraud, if proved in court, will run into the billions and the potential damages awarded will be astronomical. Here's a great summary of the circus proceedings from Yves Smith's http://www.nakedcapitalism.com/: LINK As she points out, it is likely JPM may offer up a big wad to settle this without admitting guilt. I hope the plaintiff does not settle and forces JPM to admit to the fraud. This case would not have been filed if the plaintiff didn't have rock solid evidence. If the plaintiff holds ground with a lot of paper money being dangled to settle, this could reach all the way up and bite Jamie Dimon in the ass legally.

Folks, the degree of fraud and corruption gets worse by the day. And even more troubling is that fact that the Obama administration enables it, rather than prosecuting it and cleaning it up. Obama himself has been putting pressure on the judicial system to settle these cases and make them go away. For those of you voted for Obama, is this what you voted for?

21 comments:

but must disagree with you on the usual Gold Bulls who aren't really the ones who move markets and use colourfull expletives to describe analysts and shorters of PM stocks - like "out to lunch, religious experiences etc - the shorters are showing you who is out to lunch etc.

So with such a big "value" proposition in miners why can't they get traction. Louise Yamada has a good chart showing that the XAU/Gold ratio has been on a down trend since 1997 and many many Gold Majors are back to 2003 levels and still no one is buying.

so I am giving the pumpers a little rest. Kingworldnews is also one of those. There aren't any new Gold bugs appearing - only the ones that are already.

with gold above 1600 the GDX can't even get it up! and has been going sideways since 2007.

You're right... a company like Vista Gold, with a PE of 3.6, is never going to look attractive.. Yamada's technical analysis says so, right? Yeah, right.

The problem is not the pumpers being wrong.. in this case they are right. The problem is the (bullion) market manipulators are winning the hearts and minds for now. When the dam breaks... the results will be something to behold.

It is hard to imagine a greater lie than the one that allows banks to cover up their losses indefinitely by valuing real estate loans, res/comm at 2007 prices. It is fantastic. The reason BAC is so completely fucked is that they were forced to swallow the greatest fraudulent loan producer/origantor of all time- Countrywide. I absolutely cannot believe BAC is still alive. It's like being asked to drink a gallon of battery acid and showing no symptoms.

The weirdest part? That the Oracle invested 5 billion in BAC. WTF was he thinking? What does he know that we do not, Dave?

I don't think gold and silver, PM in general, can go higher in a truth telling (deflationary) atmosphere. I welcome these daily lies. They propel the market, and thus PM's higher.

Oh the pension funds..the bag holders for the elite? this is a microcosm of what's out there...

no lights, no action, no payment..

State pension funds may take the fall for faltering film studio

Michigan's largest film production studio will likely default on a bond payment due in two weeks, sticking the state's pension funds with the $630,000 obligation.

Sources close to Raleigh Studios in Pontiac told me Wednesday that the owners have not made their required monthly escrow set-aside payments since October, and won't have the money to meet their biannual bond obligation when it comes due Feb. 1.

The only thing that could change that, the source said, is if the studio books a major production in the next few days.

"The bondholders will be paid," the source said. "But unless we get a booking, the pension funds will have to make the payment."

That's because the deal quarterbacked by former Gov. Jennifer Granholm in 2009 made the state employee pension funds the guarantor of the $18 million in bonds sold to help build the $80 million studio, located inside the abandoned facilities of the old General Motors Centerpoint truck complex.

And earlier in 2011 Rick Rule still said the miners were too expensive and now he wants to sell to us again. And miners couldn't even break through the ratios resistance set in 86 and 01. So is the struggle worth the stress?

Since the private equity firms bought the Dallas-based company, now known as Energy Future Holdings Corp. (TXU), with $45 billion in debt financing, natural gas prices have tumbled 50 percent as a process for extracting the fuel from shale called fracking rises in popularity. That has cut electricity prices in half as well.

Less than a year after extending the maturities on more than $17.8 billion of debt, credit-default swaps traders are pricing in a 91 percent chance that the company will fail to meet its obligations in the next three years. Its debt securities yield about 21 percent on average, up from 15 percent when the refinancing was announced in April.

Texas Competitive’s $1.87 billion of 10.25 percent bonds due November 2015 dropped 7 cents to 28 cents on the dollar this year, yielding 60.564 percent as of Jan. 17, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

“Even if you’re secured, you have to be scratching your head and wondering where the mechanism for repayment is coming from,” Bonnie Baha, the head of the global developed credit group at DoubleLine Capital LP, which oversees $23 billion, said in a telephone interview from Los Angeles. “Given the competitive landscape, given the changes that have occurred in the natural gas industry that weren’t really foreseen at the time these deals were structured, I’d say your capital is better deployed elsewhere.”

There's a particular piece of idiocy that is distressingly common and stupid -- the idea that lending money to governments (that is, buying government bonds) should be "cheap" or the "risk free" return rate.

This is false -- it is a convenient lie that is intentionally promulgated by both banksters and governments for their benefit and to your detriment.

The reason this is false is that all lending to sovereigns is inherently unsecured. That is, the only thing you have is a bare promise of repayment backed by the government's willingness and ability to tax the citizens.

LONDON — Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments.

http://market-ticker.org/akcs-www?post=200781

...but they would never naked short sale the miners to drive them into bankruptcy....nah..there are rules, right?lol...

JP Morgan’s lawyers are once again using intimidation tactics to scare whistleblowers in the Bear Stearns mortgage fraud machine lawsuits. Lawyers at Greenberg Traurig LP filed a public letter two days ago with Judge Ramos in New York State Supreme Court outing the name of a confidential whistleblower Ambac, Syncora & Assured Guarantee has secured to testify against the Bear Mortgage team run by Tom Marano, Jeff Verschleiser, and Mike Nierenberg. The JPM/Bear lawyers have also attempted to see copies of whistleblower affidavits before tomorrow’s big deposition in an apparent move to scare people coming forward saying they could be violating confidentiality agreements they signed when they left the third party due diligence firms Bear hired to help orchestra their alleged scheme.

I previously reported this fall about 30 whistleblower from Bear’s wholly owned mortgage servicing firm, EMC, and outside due diligence firms, Watterson Prime and Clayton have now come forward in an amended complaint filed by Paterson Belknap Webb & Tyler for three of their monoline clients (mortgage bond insurers) suing JPM/BEAR for billions. These whistleblowers detail a ‘Bear Don’t Care’ attitude towards packaging billions of residential securities sold to pension funds and other institutional investors that blew up and lost buyers billions and billions of dollars. Court documents show this extra lawer of independant due dilligence for investors was nothing more than a sham to create a false sense of confidence in the Bear rmbs product.

Cheviot Asset Management's investment director, Ned Naylor-Leyland, was interviewed for 7 minutes the other day on CNBC Europe and noted that the bullion banking system is "not fully backed" -- that is, that it is selling promises of gold it doesn't have. The interview is posted at the Cheviot Internet site here:

As we've noted for years, the entire strategy of Washington towards the economy is to cover up the fraud which caused the financial crisis ... even though prosecuting fraud and re-establishing the rule of law is the only way to get out of this depression.

One major front in Washington's cover-up effort has been to settle fraud cases with the big banks for pennies on the dollar. This is a backdoor bailout for the banks, encourages them to commit more fraud, and fails to plug the basic holes in the economy which are preventing a recovery.

Why are we bringing this up now?

Because Obama is making a giant push to pressure the states attorneys general to settle all of their mortgage-related fraud claims against the banks for pennies on the dollar.

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.